Benefit News

Wellness Program Final Rule Vacated

February 22, 2018

The U.S. District Court for the District of Columbia recently vacated key provisions of the Equal Employment Opportunity Commission's (EEOC) final rules for employer-sponsored wellness plans to comply with the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). However, to avoid disruption to employers, the court stayed its ruling until January 1, 2019.

EEOC Final Rules

On May 16, 2016, the EEOC issued final rules that became effective January 1, 2017 that describe how the ADA and GINA can apply to employer-sponsored wellness programs. Under these final rules, employers are permitted to offer wellness incentives of up to 30 percent of the cost of self-only health plan coverage to employees who answer disability-related questions or undergo medical examinations as part of a wellness program, or whose spouse provides information about his or her current or past health status as part of a wellness program. In these situations, employees may be required to reveal information that is protected under either the ADA or GINA.

AARP v. EEOC

On August 22, 2017, the court ruled against the EEOC and remanded the final wellness rules back to the agency for reconsideration. In this case, the AARP argued that the 30 percent incentive limit is inconsistent with the voluntary requirements of the ADA and GINA, and that employees who cannot afford to pay a 30 percent increase in premiums will be forced to disclose their protected information when they would otherwise choose not to do so. The court concluded that the EEOC's basis for establishing this incentive level was not well reasoned and not entitled to deference from the court. However, the court did not vacate the rules altogether at this time.

The AARP, however, was not satisfied with this court order, and went back to court, moving for it to reconsider its August ruling. In its latest ruling, the court vacated the final rules' incentive limits, stating that the EEOC's unhurried approach for issuing new wellness rules is unacceptable. The court also strongly encouraged the EEOC to speed up its rule-making process for wellness programs. The court stated that the EEOC's unhurried approach for reconsidering its final wellness rule is not what the court envisioned when it remanded the rules. The EEOC indicated that it would issue a new final wellness rule in October 2019 that would be applicable, at the earliest, in 2021. This lengthy timeline, according to the court, is unacceptable.

Thus, the court vacated the EEOC's limits on wellness incentives, but stayed its ruling until January 1, 2019, to avoid disruption for employer-sponsored wellness plans. According to the court, this extended deadline will give employers the time they need to structure their wellness plans for 2019, knowing that the EEOC's incentive limits have been thrown out. The court also encouraged the EEOC to speed up its timeline for issuing new rules on wellness program incentives.

Wellness Programs Potentially Impacted

The vacating of the EEOC's final rule specifically impact employer-sponsored wellness programs that implicate the ADA and/or GINA, including those that provide incentives for the following:

When an employee or an employee's spouse completes a health-risk assessment that contains disability-related questions

When an employee undergoes a biometric screening for a health risk factor or other type of medical examination

However, to the extent that the ADA and/or GINA are not impacted, for example, with respect to wellness programs that do not collect employee medical information, incentives may still be permitted, subject to compliance with other federal laws, including ERISA and the Health Insurance Portability and Accountability Act (HIPAA), which includes amendments as a result of the Affordable Care Act (ACA).

Employer Action Steps

For now, the EEOC's final wellness rules remain in place. However, beginning January 1, 2019, the final rules' guidance on permissible incentive limits for voluntary wellness programs will no longer apply. Employers may want to consider adding an alternative to the option of completing an HRA or undergoing a medical examination. Due to this new legal uncertainty, going forward employers should carefully consider the level of incentives they use with their wellness programs. Employers may need to re-think the design of their current program and want to consider adding an alternative to the option of completing an HRA or undergoing a medical examination.

Employers should also monitor any developments related to the EEOC's rules, as well as any with respect to any Congressional legislation introduced to address this issue. One such bill is H.R. 1313, the "Preserving Employee Wellness Program Act", introduced back in 2017, which is intended to make compliance uniform across all federal agencies, in effect making all wellness programs subject to HIPAA's rules, which are not affected by the court order.

Burnham Benefits does not engage in the practice of law and this publication should not be construed as the providing of legal advice or a legal opinion of any kind. The consulting advice we provide is intended solely to assist in assessing its compliance with the Patient Protection and Affordable Care Act and other applicable federal and state law requirements, and is based on Burnham Benefit’s interpretation of federal guidance in effect as of the date of this publication. To the best of our knowledge, the information provided herein, and assumptions relied on, are reasonable and accurate as of the date of this publication. Furthermore, to ensure compliance with IRS Circular 230, any tax advice contained in this publication is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter.

Burnham is a modern employee benefits and insurance services company. We apply a unique blend of expert knowledge, unmatched personal service and proactive planning to create proven strategic solutions and promote a culture of wellness for our clients.

Burnham is a certified B Corp, a designation reserved for companies who reflect not just the desire to be the best in the world, but the best for the world.